Page last updated at 14:17 GMT, Tuesday, 9 June 2009 15:17 UK

Brazil's economy enters recession

A street trader in Sao Paulo (pic: Robert Plummer)
Many investors are betting Brazil will recover faster than other countries

Brazil has gone into recession after its economy contracted by 0.8% in the first three months of 2009.

The figure from statistics agency IBGE was still better than expected and a big improvement on the 3.8% decline in the last three months of 2008.

Most economists define a recession as being two consecutive quarters of negative growth.

Also on Tuesday, Romania went into recession following a decline of 4.6% in the first three months of the year.

It had contracted 3.4% in the last three months of 2008, according to the statistics agency Ins.

The International Monetary Fund, which has recently approved a 12.9bn euro ($18bn; £11.1bn) loan for Romania, predicts that its economy will contract by 4.1% in the whole of 2009.

'Momentum'

In Brazil, while household spending grew 0.7% and government spending expanded 0.6%, capital spending fell by 12.6% in a sign of companies cutting back on investment.

"The stronger first-quarter number should add some momentum to the view that the second-quarter recovery could be stronger than expected and growth may not be as bad for the whole year," said Paul Biszko from RBC Capital Markets.

"Obviously it's positive for the currency and I think it will lessen the need for the central bank to cut interest rates aggressively, moving forward."

Foreign investors have been putting money into Brazil recently in the hope that its economy will recover more quickly than other countries.

The Ibovespa stock market index has been reaching levels not seen since before the global financial crisis.



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